Energy customers reluctant to switch

Energy Secretary Ed Davey has announced an annual review of the energy market. Dr Monica Giulietti from Warwick Business School's Global Energy Group has been studying UK energy prices for 15 years.

Dr Monica Giulietti said: “This market has been the subject of several investigations starting with the Energy Supply Probe in 2008 and although problems of tariff complexity and lack of transparency have been identified no evidence of anti-competitive behaviour has been discovered yet.

“The perception is that the attempt to engage the consumers in the market has failed. The multiplication of tariffs has been a massive problem for people who are determined to find the best deal, but discovered it is very difficult to identify the best one for them. Consumers still seem to perceive the switching process as complicated and time consuming, so their actions have not brought about the competition that was hoped for when the liberalisation process started in the mid-1990s.

“We have had 15 years of attempting to generate competition through switching but all the evidence is that there is a lot of consumer loyalty and reluctance to switch.

“The wholesale market is an area of contention. There is an element of truth in what the ‘big six’ are saying. Energy price increases have been observed in the UK starting from 2004 when the country became a net energy importer and costs went up. In addition, the recent interventions in the market by the Government, to deliver environmental and social policy objectives, have contributed to the costs which make up our energy bills.

“However, there is a strong element of uncertainty about how the energy suppliers’ costs are calculated. That is the big issue, how to estimate what the wholesale price is. In the absence of a well-functioning wholesale market which gives correct price signals we cannot tell whether the suppliers’ profits are fair.”